Panels & Furniture Asia May/June 2022

MARKET REPORT
Markets poised for growth,
supply chain disruptions
slowing resurgence
By Judd Johnson, managing
editor, Hardwood Market
Report Publications
The recovery in eastern US hardwood
sawmill production has reached a plateau
of approximately 17 million cubic metres.
Importantly, that level of output is not
nearly at capacity. Hardwood Market
Report (HMR) believes that hardwood
sawmill production systems currently in
place could surpass the 20 million cubic
metres mark. Despite prices reaching
record highs these past months for most
primary species and many secondary
species, eastern US hardwood sawmill
production did not respond to the
incentives as expected.
HMR also believes that the underlying
demand for US hardwood lumber is
much higher than the level at which
the marketplace is performing. Before
disruptions from COVID-19, global
consumption of US hardwoods was
averaging nearly 20 million cubic metres
annually. If demand for US hardwood
lumber has fundamentally changed
since then, it is likely increasing, not
decreasing. More on that later.
The fact that higher numbers have been
achieved in the past provides a strong
argument that both the supply and
demand sides of the marketplace can
perform better. But until that happens,
there are not many individual businesses
can do to push things forward (Figs. 1
and 2).
WAITING
Just as one is for their business, the
world is waiting for transportation
snarls to clear: Delayed receipts of
purchased lumber; delayed shipments
of manufactured goods to intended
destinations; and ever-higher spiralling
prices for ocean container and inland
shipping.
These constraints become larger
problems. Delayed deliveries of materials,
parts and goods turn into supply
shortages in downstream markets. These
shortages trigger competitive pricing,
which invites inflation.
Higher prices can be absorbed in the
marketplace to a point. Over time,
elevated prices can change the designs
or scopes of projects. Rapid and rampant
inflation, as seen in the US with softwood
building materials, can bring projects to
a halt – even if temporarily. Unchecked,
inflation can force consumers out of the
marketplace.
Figure 1
26,000,000
24,000,000
22,000,000
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2014-1
2
3
4
2015-1
2
3
4
2016-1
2
Separately, COVID-19 and its variants
are still disruptive forces in the
marketplace. Yes, there have been great
improvements in guarding humans
against the disease, but there is no
comprehensive prevention of the virus.
Therefore, whatever means are taken
to mitigate the spread from areas with
breakout cases, commerce is at risk of
ongoing disruptions.
A recent example is China’s lockdown of
Shanghai to achieve “zero COVID”. A city
of Shanghai’s stature being shut down
even for a few weeks has tremendous
repercussions on global commerce.
Just in terms of population, economic
activity is compressed for this city of
over 26 million people. For comparison,
the country of Canada has 38 million
Quarterly Eastern US Hardwood Sawmill Production
(Annualized - Cubic Meters)
Production averaged
19.6 million M3 from Q1 2014
through Q3 2018
3
4
2017-1
2
3
©2022 HMR
4
2018-1
2
3
4
2019-1
Production averaged
14.9 million M3 from Q1 2020
through Q1 2022
2
Historical record low
quarterly production of 11.2
million M3 meters set in Q3
2020.
3
4
2020-1
2
3
4
2021-1
2
3
4
2022-1
16 Panels & Furniture Asia | May / June 2022